Take a deeper look at Maine’s tax reform plans

On Thanksgiving Day, Christopher St. John defended the Bangor Daily News’ support of “tax reform” and attacked Charlie Webster, Republican Party chairman, for what he called “distortions.” Mr. St. John, like the rest of supporters, repeats the tired refrain that “the most important fact is that Maine Revenue Services estimates that the great majority of Maine households at every income level, both very low income, those who ‘work as a waitress or drive a truck,’ and higher income households will have a lower overall tax liability under the reform plan than under present law.”

Look a little deeper into Maine Revenue Services estimates and there is another side of the story. Under the new law, 300,000 mostly elderly Mainers on fixed incomes will pay more in sales tax under the plan. It is true, they are eligible for a $50 to $70 income tax credit to offset the sales tax increase. MRS and Mr. St. John, however, know these taxpayers will have to file an income tax return to get it. MRS estimates at least 50 percent won’t and they have budgeted $5.7 million in new government revenue off the backs of some of the oldest and most vulnerable in our state.

In addition, MRS estimates 87,000 Maine tax families will pay significantly higher taxes in the first year of the new tax law. This unfortunate group is made up mostly of individuals with high deductions for medical expenses, interest expense, charitable donations and property taxes. These deductions are repealed and replaced with a complicated capped credit system. The new tax law plan places the burden of higher taxes on those who are unfortunate enough to have saved and worked their entire lives and then have a loved one go into a nursing home. The message to people retiring in Maine is move to a tax-friendly state before your health fails.

Another fact Mr. St. John doesn’t tell you is that almost all of the small 2010 tax cut disappears by 2014 for the Mainers he calls the “very low income, those who waitress or drive a truck.” There is a clever gimmick buried in the law that eliminates inflation indexing of credits and income tax rates until the year 2014. According to data supplied by MRS, between $8 million and $12 million in tax relief is lost each year without indexing. The MRS report for the year 2013 estimates that a group of less than 5,000 taxpayers earning over $350,000 will get a net tax cut of $34.8 million, while the other 99.3 percent of Mainers will see a net tax increase of $3.5 million.

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Mr. St. John chides Mr. Webster for claiming Maine is one of the highest taxed states in the nation. He points to the U.S. Census data that Maine ranks “only” 15th highest based on per capita data. He does not tell you that the same U.S. Census data show that Maine’s state and local taxes as a percentage of personal income was the sixth-highest of the 50 states. This ranking is more important than per capita rank, because it ranks based on the ability of Mainers to pay tax.

Supporters of the new tax law continue to claim “historic tax relief for most Mainers.” This claim has always been exaggerated, overblown, and in the coming months we will prove it. Still Fed Up with Taxes, for which I serve as spokesman will prove “tax reform” has always been about more money for state government.

Mr. St. John and others have advocated for years that we expand the sales tax. The new tax law is all about shifting the sales tax onto services that are essential like auto repair and appliance repair. Over time, inflation guarantees more and more sales tax revenue even when Mainers’ income and ability to pay taxes decreases. Under the guise of revenue stability, the Democrats will move to expand the sales tax further to tap the $2 billion in sales tax exemptions currently on the books. State government will have an endless supply of new revenue. This is not tax reform, it is clearly a tax shift between sales and income taxes in 2010 followed by a tax increase in years after 2010.

David Trahan, R-Waldoboro, represents District 20 in the Maine Senate.